CONSUMERS GOODS AND LIFE SCIENCES AMONG INDUSTRIES AFFECTED BY RED SEA SHIPPING CRISIS – THE SMART CUBE COMMENTS

Business operations across a range of industries are continuing to feel the impact of the Red Sea shipping crisis. According to research conducted by the British Chambers of Commerce*, 55 per cent of UK exporters and 53 per cent of manufacturers and business-to-consumer (B2C) firms, such as retailers, have faced disruption due to the ongoing conflict.

The attacks have disrupted global supply chains, forcing shipping companies to divert supplies away from the region, with vessels originally set to sail through the Red Sea being rerouted around Africa via the Cape of Good Hope for safety reasons. This has resulted in delays of up to four weeks for supplies along with increasing transportation costs, putting upwards pressure on prices.

Ritesh Kumar (he/him), director, procurement and supply chain intelligence at The Smart Cube, comments on how the Red Sea shipping crisis is impacting different sectors:

“The Red Sea crisis is causing ripple effects across a range of industries, disrupting supply chains and causing price fluctuations, globally. In terms of consumer goods, wheat and sunflower oil prices are starting to increase; disruptions to the supply of both the commodities is resulting in shipments being delayed. What’s more, the crisis is disrupting the delivery of European dairy products to Southeast Asia, leading to both delays and higher freight costs, causing a dip in the supply of dairy goods.

“Additionally, Europe is a key importer of electronic components from Asia. The crisis has led to approximately two weeks being added to electronic consignments from Asia-Pacific (APAC) to Europe as shipments are rerouted via the Cape of Good Hope, thereby increasing costs. As such, several consumer goods, including PC shipments to Europe, are being adversely impacted by the ongoing Red Sea attacks, resulting in increases to lead times and costs. This is also an issue for the life sciences sector, whereby electronic parts are used in the manufacturing of medical devices.

“The automotive industry is also witnessing an uptrend in lead times, pushing prices upwards. The European automotive sector is heavily reliant on the supply of essential components from Asia, with approximately 70 per cent of parts passing through the Red Sea waters. Delays in shipping schedules are impeding the pace of European car production and resulting in increased lead times. Consequently, several automotive and ancillary equipment manufacturers have announced pauses in production, while Audi’s car deliveries to customers in India has slowed down significantly due to supply chains issues caused by the ongoing situation in the Red Sea.

“Adding to this, plastics are one of the key commodities that are most severely impacted by the ongoing attacks in the Red Sea due to their inability to absorb freight hikes, thereby fluctuating prices. This has resulted in price rises for various biopharma categories such as single-use systems, lab supplies and packaging. The crisis also presents a risk to key pharmaceutical ingredients and chemicals, especially from APAC to Europe, with the rising shipping costs, delays and supply disruptions causing active pharmaceutical ingredient (API) prices to increase significantly.

“While the conflict in the Red Sea continues, the cost of goods traded between Europe and Asia will remain significantly impacted. In turn, this will have an adverse effect on a host of industries, including consumer goods, electronics, and life sciences.”

* https://www.britishchambers.org.uk/news/2024/02/scale-of-red-sea-disruption-revealed/